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News Flash – March 27, 2014

INDUSTRY

U.S. Weekly Outlook: Reports continue to support corn and soybean prices

March is one of four months that in the year where an unusually large number of reports that reflect supply and demand conditions for corn and soybeans are released. According to a University of Illinois agricultural economist, the number of reports is larger in January, March, June, and September when various quarterly USDA reports are released. “So far this month, information in the regular monthly reports has been generally supportive for corn and soybean prices,” said Darrel Good. “The Census Bureau report of January 2014 exports released on March 7 indicated that cumulative marketing-year exports of both crops exceeded the cumulative USDA weekly export inspection estimates. Census Bureau corn export estimates from September 2013 through January 2014 exceeded the cumulative USDA inspection estimates by 29 million bushels. That margin is 10 million less than the average margin of the previous nine years, but is the largest in four years. For soybeans, the cumulative Census Bureau export estimates through January exceeded the cumulative USDA weekly inspection estimates by 19 million bushels. That margin is nine million bushels larger than the average margin of the previous nine years and the largest in four years,” he said. The USDA World Agricultural Supply and Demand Estimates (WASDE) report released on March 10 contained smaller forecasts of the size of the current harvest of the soybean crops in both Brazil and Paraguay. That same report contained larger forecasts of U.S marketing-year exports and smaller forecasts of year-ending stocks of both crops. SEEDQUEST

 

SOYBEAN

Soybeans Slip as Investors Weigh Stockpiles Against Acres

Soybeans rose in Chicago, reversing an earlier decline, as investors weighed signs of tight supplies left over from the past U.S. harvest against planting that’s expected to reach a record in the country this year. U.S. inventories probably totaled 987 million bushels on March 1, the lowest in 10 years for that date, according to a Bloomberg News survey before the U.S. Department of Agriculture releases its quarterly grain stocks report March 31. The USDA will release results of its national planting survey of growers the same day, which may show farmers will sow a record 81.16 million acres next season, analysts said. Bloomberg

 

Record Argentine soy crop to pump exports despite hoarding

Argentina will put downward pressure on world food prices by exporting more soy this year, even as growers hedge against the country’s dysfunctional financial system by hoarding a bigger chunk of what is expected to be a record high crop. The biggest harvest ever seen on the Pampas farm belt started last week, setting the stage for increased exports from the world’s third largest soybean supplier. The size of the expected crop increase will at the same time allow growers to stockpile a larger percentage of the crop than last year. Farmers are hanging onto their soybeans to use as a unit of savings preferable to Argentina’s feeble peso, which has weakened by 18.2 percent this year. They use beans to barter for everything from seeds to pickup trucks, restricting supply and supporting international soy prices over the last year. Reuters

 

Soybeans Climb to One-Week High as U.S. Reserves Seen Declining

Soybeans advanced for a fourth day to the highest level in a week on speculation that inventories in the U.S., the largest grower, have decreased as exports rose. The contract for May delivery climbed as much as 0.3 percent to $14.445 a bushel on the Chicago Board of Trade, the highest since March 20. Futures were at $14.43 by 12:05 p.m. in Singapore, extending the 2.2 percent advance in the three days through yesterday. Prices jumped 12 percent this year. Stockpiles on March 1 probably dropped to 987 million bushels (26.9 million metric tons), the smallest for this time of year in a decade, according to the average of 30 analyst estimates compiled by Bloomberg. Reserves will be equal to 30 percent of estimated annual use and exports of 3.319 billion bushels, the lowest ratio for this time of year since at least 1965, U.S. Department of Agriculture data show. The agency will update its quarterly crop-inventory estimates on March 31. “Soybeans continue to be supported over concerns of tightening U.S. supplies and robust export demand,” Vanessa Tan, an analyst at Phillip Futures Pte in Singapore, said in a report today. Since Sept. 1, shipments of U.S. soybeans jumped to 39.7 million tons, up 22 percent from a year earlier and almost reaching the government forecast for 41.64 million tons for the entire 12 months ending Aug. 31, according to the USDA. Wheat for May delivery was unchanged at $6.9675 a bushel in Chicago. Corn fell for a third day, dropping 0.2 percent to $4.835 a bushel. There may be less demand for corn as ethanol inventories expanded in the U.S., Tan said. Total stockpiles were at 15.7 million barrels in the week ended March 21, up 2.5 percent from a week earlier, showed data from the Energy Information Administration, statistical arm of the Energy Department. Bloomberg

 

PALM

Palm oil down 0.1% on profit-booking

Crude palm oil prices fell 0.17% to Rs 575 per 10 kg in futures market today as speculators booked profits at prevailing levels amid sluggish demand in the spot market.At the Multi Commodity Exchange, crude palm oil for delivery in March declined by Rs 1, or 0.17% to Rs 575 per kg in business turnover of 58 lots. However, the oil for delivery in April held steady at Rs 576.30 per 10 kg in 78 lots. Analysts believe that profit-booking by speculators at existing levels, and sluggish demand in the spot markets have been the primary influence of crude palm oil futures prices. Business Standard

 

BIOFUEL

U.S. EPA head defends proposed cuts in biofuel target for 2014

U.S. energy markets cannot absorb the levels of biofuels required by law to be blended into the fuel supply in 2014, Environmental Protection Agency head Gina McCarthy said on Thursday, defending a controversial proposal to slash the target for this year. The EPA is working on final 2014 biofuel use targets after it issued a proposal in November that slashed federal requirements for ethanol in U.S. fuel supplies. McCarthy’s comments suggested the agency might stick to its guns, or come to some kind of middle ground on targets. The draft rule cut the 18.15 billion gallons (68.7 billion liters) of biofuels mandated for use by a 2007 law down to 15.21 billion gallons, angering biofuel producers who argued the rule would damage their industry. The final rule is expected to be released in June. The Renewable Fuel Standard, passed by Congress and

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administered by the EPA, calls for increasing the amount of biofuels used in the United States each year, until 2022. Slack U.S. fuel demand has placed the nation on a course to hit the so-called blend wall, the point at which the mandate will require the use of more ethanol than can be blended into the fuel supply at 10 percent per gallon, the standard that reflects much of the current U.S. fueling infrastructure. Oil refiners, who oppose the biofuel mandate, are reluctant to blend more than 10 percent ethanol into gasoline because of possible harm it could do to older vehicles. Without cuts to the federal mandate, they would be forced to export more gasoline or produce less of it.Biofuel producers say blend wall issues have been exaggerated because refiners refuse to embrace higher ethanol blends in gasoline: E-15, which has 15 percent ethanol, and E-85, an 85-percent ethanol fuel that can be used by the limited fleet of so-called “flex fuel” vehicles. The EPA has authorized the use of gasoline blends with up to 15 percent ethanol content for cars built since the 2001 model year, which represent about two-thirds of vehicles currently on the road. Reuters

 

FAPRI projects stable ethanol production, margins through 2024

Corn prices are likely to remain around $4 per bushel and soybeans at $10 per bushel over the next decade. Ethanol production will remain flat and corn oil use for biodiesel will continue to grow, according to an analysis released by the Food and Agricultural Policy Research Institute at the University of Missouri, “U.S. Baseline Briefing Book—Projections for Agricultural and Biofuel Markets.” Corn acres are projected to be stable, showing an average of 90.7 million acres over the decade from 2015 to 2024 compared to an average 89.9 million acres in the past five years. Acreage for 2014/15 is projected at 91.3 million acres. The figures reported represent the average of 500 alternative outcomes based on different assumptions about the weather, oil prices and other factors, the authors of the report explained. The baseline also incorporates key provisions in the new Farm Bill. The policy baseline assumes that the U.S. EPA proposal to modify the 2014 renewable fuel standard will be adopted and a similar approach will be used to set biofuel use mandates in subsequent years. “Projected growth in ethanol production over the next several years is limited.” With corn ethanol production forecast to remain flat, the section on corn products shows no growth in distillers grains production, with the relative shares of domestic and export markets remaining the same as current levels. The charts also indicate DDGS prices will continue to follow corn prices, with DDGS prices at 107 percent the value of corn in 2014/15, rising slowly each year to reach 115 percent the price of corn by the end of the decade modeled. Corn oil production is projected to grow from 5.57 billion pounds in 2014/15 to just over 6 billion pounds in the next marketing year and hovering around 7.2 billion pounds through the rest of the decade ahead. Feed use of corn is projected at 1.58 billion pounds in 2014/15 and biodiesel use is projected at 1.07 billion pound. Another 1.85 billion pounds is projected to be used in category for food and other uses. The projections indicate biodiesel use of corn will more than double over the next decade, reaching 2.85 billion pounds by 2023/24, while feed use peaks in 2019/20 at 1.97 billion pounds, declining to 1.73 billion pounds by the end of the decade-long projections. The food and other category declines to 1.5 billion gallons over the period, while exports hover around 1 billion pounds. Corn oil prices are forecast to stay about 110 to 112 percent of the price of soy oil throughout the next decade, with the Chicago price forecast to remain around 38 cents a pound. In the section on ethanol and biofuel policies, the FAPRI report shows ethanol production growing slowly. “Cellulosic and noncorn ethanol production levels remain an uncertainty,” the report says. The U.S. will remain a net exporter of ethanol through the decade ahead. Ethanol exports are projected to peak at 1 billion gallons in 2014, leveling off at around 800,000 million gallons per year for the rest of the decade ahead. Sugarcane ethanol imports from Brazil are forecast to be level at about 200 million gallons for the next decade, compared to a peak more than twice that in 2012 and just under 400 million gallons in 2013.Biofuel net returns show modest growth beyond 2014, according to the FAPRI report. “Dry mill ethanol net returns over operating costs decline in 2014, and then remain relatively stable,” the forecast said, showing a 2013 peak of 54 cents per gallon produced, and annual net returns between 25 and 29 cents through the decade ahead. The report makes a similar analysis of other agriculture sectors as well as projecting food prices, farm income, and more. Ethanol Producer Magazine